Chamber Dead Wrong on Forced Arbitration

In a letter to the New York Times today, Lisa Rickard, the president of the U.S. Chamber Institute for Legal Reform, praised arbitration as a real advantage to consumers over class action litigation. With arbitration, she argues, consumers can quickly and cheaply get their money back. According to Rickard, that's a lot better than a class action involving thousands of people, in which the lawyers end up making a lot of money.

The Chamber misses the point entirely. Arbitration actually often prevents a consumer from ever bringing a case and effectively allows a corporation to get away with fraud.

Think about a cellphone company that every month slips in a phony charge for $1. Over the course of a year, that adds up to a $12 charge that shouldn't be paid. It's outrageous and wrong, but no one is going to take that to court or go to arbitration.

But put together a class action of a million consumers who all had to pay that $12 charge, and now you're talking real money. That makes it worthwhile for a lawyer to take the case, even though the lawyer is taking it on contingency, having to cover the expenses and risking the chance of losing. In the end, it is true that the consumer might not get the full $12, and the lawyer may end up making money if the case is successful.

But the fraud will be exposed, the company will be forced to stop, and the consumer will no longer be ripped off.

That is a much better proposition than taking a $12 overcharge to arbitration.